Conflicting Priorities

A Local News headline in this week's Commercial Appeal reports that "Poor kids a school majority only in the South." According to the Southern Education Foundation, a whopping 80% of Memphis' elementary and secondary school students participated in the free or reduced-price lunch program in 2006. The Foundation's report concludes that "unless more is done for this under-served population, the region will face a crisis." This is an apt follow-up to the reality check offered by Mayor Wharton and former Congressman Harold Ford, Jr. in their article "Fixing broken dreams" (Viewpoint section of the October 28, 2007 Commercial Appeal). Here, authors argue that improving school children's futures through education will require a variety of policy changes for school systems that are "built for the Industrial Age". While we hear much using economic development policy to attract single, well-educated, young people, how can an economic development policy for Memphis encourage growth AND respond to tough urban problems such as poverty and substandard education in an effective manner?

In 2001, the Brookings Institution published an interesting article entitled Envisioning a Future Washington, in which authors Carol O'Cleireacian and Alice Rivlin compare two very different approaches to economic development and fiscal stability in Washington D.C.. The first strategy evaluated is the "Adult Strategy" where the District would seek to attract higher-earning singles and couples--think creative class here. In addition to enjoying city living and valuing the diversity of the urban environment, these people would also seek a safe city with good government.

Making the District more attractive for these folks would mean sprucing up some public areas, creating vibrant mixes of commercial and residential, fast-tracking new home construction and revitalizing existing housing and commercial areas. The authors estimate that the in-migration of 50,000 people under the Adult Strategy could produce a net annual increase over operating expenditures of $300 million for the District.

Some anticipated results include the city increasing its ratio of adults to children; experiencing an increase in upper-middle income residents; and probably see an increase in the ratio of Blacks to Whites. Without strong leadership, this strategy could also risk exacerbating race and class tensions, gentrify neighborhoods, push lower-income residents out of the city, and create a population of newcomers that would not stay and fight for "better schools or help for low-income families." Communities in the District would fail unless supported by strong leadership and, most likely, tax deferrals and rent subsidies.

The second strategy is predictably entitled the "Family Strategy." Here, the District seeks to attract middle-income parents with children. Many would be educated and employed in service and knowledge industries such as law enforcement, medical services, universities and government. The authors recommend that the District target distressed neighborhoods for revitalization by encouraging families to move in to these areas. The families would probably live modestly in comparison to the single and coupled adults. They would increase demand for affordable and subsidized housing, and place greater demands on the school system.

The additional requirements would probably strain the District's budget, since the families would generate less tax revenue but require greater investment in the community by the District. The in-migration of families could shrink the middle income gap, lead to greater profitability of neighborhood businesses by increasing demand for local services, stimulate the development of healthy neighborhoods and strong communities, and lead to better educated, more committed citizens who participate in local political processes and stay in District neighborhoods. The authors suggest that District leadership would need to be aware of and manage the effects of neighborhood revitalization on long-term residents of targeted areas.

For O'Cleireacian & Rivlin, the point is that the best economic development strategy recruits both adults and families. This approach would also seem to work well for other cities. Transcience in adults can be moderated by commitment to community from families. An increased fiscal burden on local government resulting from the need for school facilities and housing can be reduced by increased tax revenue from higher-earning single and coupled adults. Race and class tensions can be reduced by introducing diverse middle income families and local consumption economies as well as export-based knowledge economies are encouraged to grow.

Memphis should continue to work to attract those 25-34 year old, single, intelligent members of the creative class. Quite frankly, the city needs their income potential and knowledge-making abilities. However, Memphis should also take appropriate steps to encourage families to return. Memphis’ neighborhoods and children need the stabilizing effects of committed families as badly as they need revenue from single people. Only a comprehensive economic development strategy that acknowledges existing urban issues, suggests multi-faceted responses and demands quality public leadership to manage the policy changes necessary to produce effective results will alter a much too predictable future.

City Budget Surplus, a Bad Thing?

Fair Haven, A small town in Vermont, with 3,000 residents recently discovered that their government has a surplus of close to one million dollars, which amounts to about two-thirds of the annual budget. At first glance, this surplus seems great and it appears that the community is doing well. Many residents, however, are angry about learning about the surplus. They charge the town has mismanaged money or worse overtaxed them. The surplus which has been accruing since 1994 occurred because the town did not spend the full amount allotted for projects such as road paving. Instead of applying the leftover money to the next year’s budget, the town treasurer invested the money in certificates of deposit and bank account and a new budget was created from scratch.


Other cities have budgets that cover the spectrum from healthy to barely staying afloat. In San Francisco they have managed to move from a deficit to having available money for economic development. Toronto's budget problems have lead to a cut in the quality of life and services for residents. Minneapolis has worked to develop a budget that reduces its debt service to provide more money for city services.

It would be interesting to see how many cities have regular surpluses and how many barely operate in the black. What should a budget look like? Low taxes, but low services and barely operating in the black. Higher taxes, good services and managing routine surpluses.

Are cities required to have a reserve fund? If so, does it have to be a certain percentage of their operating income. What is the frequency that cities dip into reserve funds to cover deficits?


Should cities slash services to reduce their deficit or do they make incremental changes and reduce costs to multiple items in their budget. Or worst of all to a resident, raise taxes.

When services are reduced, do cities take into account that lowering the level of services provided may cause people to leave since they do not feel that their tax dollars are being used properly. Budget saving techniques such as not hiring the needed number police officers or not maintaining city parks or even streets do not encourage investment in areas. The people who can and will move to get better services for the tax dollars are the kind of people the city wants to keep. There is much talk about attracting the 25 to 34 years old to cities as an economic development strategy. This can only be successful if there is a good quality of life in the area and amenities like good schools, parks, etc. A city operating in survival mode to reduce its deficit and keep the budget afloat will not be able to attract these young people and the entrepreneurial spirit they bring with them.

With all that said, what kind of state is the City of Memphis budget in?